PALM BEACH, Fla. — With a trio of executive orders, President Donald Trump has almost instantly thrown the world economy and his own goal of cutting inflation into turmoil.
His tariffs against Canada and Mexico in order to stop illegal immigration and the illicit fentanyl trade led to retaliatory taxes by both countries on U.S. imports. He placed an additional 10% tariff on imports from China with the stated goal of stopping the production of fentanyl.
But on a deeper level, Trump suddenly hit the U.S. economy with tax increases that, if sustained, could total more than $1 trillion in 10 years. He did so without congressional approval and by his own acknowledgement at the perilous chance of “some pain” in the form of higher inflation, job losses and worse growth.
Here’s an explanation of what Trump’s executive orders say and how they work:
What is the International Emergency Economic Powers Act?
This is the 1977 law that helped enable Trump to declare an economic emergency in the executive orders and implement his tariffs. There are more than three dozen active emergencies, including measures taken to respond to the 1979 Iran hostage crisis, human rights violations in Venezuela, nuclear weapon development in North Korea and multiple actions taken by China and Russia.
The law enables a president to freeze and block transactions in response to “unusual and extraordinary” threats outside the United States.
What are the tariffs on Canada, Mexico and China?
The tariffs would start at the beginning of Tuesday.
There would be an additional 25% tariff on imports from Canada, with a lower 10% charge on the oil, natural gas, electricity and other energy products. Energy products were taxed at a lower level to prevent U.S. consumers and businesses from paying higher prices for gasoline and utilities. Mexican imports would face an additional 25% tax. China would face an additional 10% tariff.
While Trump has said that foreigners pay these taxes, the tariffs would be paid by the individuals and companies bringing in the goods — which means this would be a domestic tax increase.
Why were the tariffs imposed?
Trump’s orders say the tariffs are a consequence of illegal immigration and drug smuggling. Not everyone will agree with his reasoning, as U.S. government reports show that unauthorized border crossings from Mexico have fallen over the past year and seizures of fentanyl along the northern border are relatively low.
But Trump’s order on Mexico says that drug traffickers and the country’s government “have an intolerable alliance” that “endangers the national security of the United States, and we must eradicate the influence of these dangerous cartels.” His order on Canada says that Mexican cartels are operating in that country and claims despite the modest amount of fentanyl intercepted that it would be enough to kill “9.5 million Americans.” The order on China says that country’s government provides a “safe haven” for criminal organizations to “launder the revenues from the production, shipment, and sale of illicit synthetic opioids.”
Those are the stated legal reasons, but Trump has expressed a deep admiration to tariffs in general, claiming that they would make the United States wealthier even though they are tax hikes that can be passed along to consumers and businesses in the form of higher prices.
Could the tariffs be increased?
Yes. The orders are very clear that the U.S. president can respond to retaliatory actions — which are already planned as Canada and Mexico have their own counter-tariffs ready for U.S. products. Should they take action, Trump “may increase or expand in scope the duties imposed under this order.” What’s key here is that the tariffs wouldn’t increase automatically. It would still be the U.S. president’s choice.
What’s this ‘de minimus’ language mean?
This is an important clause in the orders. When people import goods worth less than $800, like say a dress bought online from a European retailer, they don’t pay customs and duties on their purchase. This is legally known as the “de minimus” treatment, which suggests that the cost of what’s being imported is too low to merit a tariff. That exclusion would no longer apply to products imported from Canada, Mexico and China.
Can Congress stop the tariffs?
It would require a new law that Trump would have to sign, which seems unlikely based on his statements. Still, Congress will have some oversight responsibilities as the order requires the Homeland Security Department in consultation with other agencies to “submit recurring and final reports to the Congress on the national emergency.”
How can the tariffs be lifted?
The administration has not set any benchmarks for the other countries to meet, though a senior official suggested that declines in fentanyl-related deaths would be an option. What the order suggests is that the choice would ultimately be at Trump’s discretion.
It orders Homeland Security Secretary Kristi Noem to consult with her counterparts at the State and Justice departments, as well as White House officials. This specifically refers to the post at Homeland Security, rather than Noem specifically. But she would be able to inform the U.S. president of whether “adequate steps” have been taken to address the emergencies. It would then be up to the president to determine whether to remove the tariffs.